Magnetic bacteria synthesize intracellular magnetosomes that impart a cellular swimming behaviour referred to as magnetotaxis. The magnetic structures aligned in chains are postulated to function as biological compass needles allowing the bacterium to migrate along redox gradients through the Earth's geomagnetic field lines. Despite the discovery of this unique group of microorganisms 28 years ago, the mechanisms of magnetic crystal biomineralization have yet to be fully elucidated. This review describes the current knowledge of the genes and proteins involved in magnetite formation in magnetic bacteria and the biotechnological applications of biomagnetites in the interdisciplinary fields of nanobiotechnology, medicine and environmental management.